Consolidation of multi-contracts in the Islamic financial transactions

Abstract

Single contrllcts and multi-contracts are inseparable part of Islamic commercial transactions. Single contracts are confined to simple transactions and they are often joined to form multi-contracts to concretize complex dealings. The multi-contracts are achieved by consolidation of contracts governed by a set of principles and methodology. The study of the principles and the methodology has been minimal and this shortcoming requires investigation for promoting efficient and dynamic evolutions of financial transactions. Besides affrrming the general principle of permissibility of transactions, the study is founded in a strong belief that the Shari'ah has left invaluable treasures that can solve the problem. For the purpose of enhancing the financial transactions in the contemporary environment, this study aims at discovering the principles and the methodology by investigating the rulings of consolidation, the elements disapproving the consolidated contracts, the purposes in the consolidation and the means that brings about the consolidation. The Malaysian experience in employing consolidation of contracts and the possibility of applying the consolidation as a mode of financial engineering are also studied. The study employs an analytical and deductive approach based on data obtained from the classical literature, contemporary writings derived from books, seminar papers, periodicals, public documents and Statues. From the analysis and deduction, the conclusion is then reached. The study discovered that multi-contracts have existed in the form of combined and complex contracts since the time of the Prophet SAW. It also found that consolidations of multi-contracts are governed by principles and methodology. The study concludes that the consolidations of contracts lead Islamic financial transactions in the contemporary banking and finance to prnctical applications in financial engineering for inventing financial products and instrument that enable the transactions to meet the demand of contemporary challenges in the Islamic financial sector.